It’s been said that the most difficult part of purchasing a home is the getting home loan. It’s not as hard as you might think. Below I have outlined a few of the options on four different types of Mortgages available to buyers today. Plus, there are other programs available if you know where to look and who might qualify. Read through the programs below or call Amazing Kim to see if there might be another option available for you.
Do you know your credit score?
Before we talk about loan options, let’s look at understanding credit scores. A credit score is a number lenders use to help them decide how likely it is that they will be repaid on time if they give a person a loan or a credit card. Your personal credit score is built on your credit history. Custom credit scores can apply to specific types of lending, such as mortgage lending.
How credit scores are created…
There are three main credit bureaus – Equifax, Experian and TransUnion – that create your credit reports, which credit scoring models like VantageScore and FICO use to come up with a score that typically ranges from 300-850. The credit bureaus can also calculate scores for you based on their own proprietary models.
Your scores are typically based on things like how often you make payments on time and how many accounts you have in good standing. Your score will never factor in personal information like your race, gender, religion, marital status or national origin.
Why you could have different scores…
With so many ways to calculate credit scores, it’s not uncommon to have multiple different scores at the same time. You could have different scores if a lender doesn’t report to all three credit bureaus or reports updates to them at different times. Some lenders may only report to one or two bureaus (or none at all). You could also have different scores depending on the lending situation. For example, an auto lender might use one scoring model, while a mortgage lender uses another.
Even if your credit score is subprime, Amazing Kim can help you get your dream home. Call today and learn how!
An FHA loan is a mortgage insured by the Federal Housing Administration. Borrowers with FHA loans pay for mortgage insurance, which protects the lender from a loss if the borrower defaults on the loan.
Who can qualify for an FHA loan?
Typically an FHA loan is one of the easiest types of mortgage loans to qualify for because it requires a low down payment and you can have less-than-perfect credit. For FHA loans, down payment of 3.5 percent is required for maximum financing. Borrowers with credit scores as low as 550 can qualify for an FHA loan. An FHA Loan is available with fixed rates or as an adjustable-rate mortgage.
A conventional mortgage is a home loan that isn’t guaranteed or insured by the federal government and conforms to the loan limits set forth by Freddie Mac and Fannie Mae. You can get a conventional loan at a fixed or adjustable rate. Three other options — FHA, VA and USDA loans — are backed by the federal government.
Who can qualify for a conventional loan?
Your credit score is a major part of the equation when qualifying for a conventional mortgage. Fannie Mae requires that the borrower have a credit score of at least 580. If your score is lower than 580, you may find it difficult to get a conventional home loan. Conventional loans versus FHA Loans also have advantages in certain situations. If you make a 20 percent or more down payment for your home, you will not have to pay mortgage insurance to obtain your loan. An FHA loan -– no matter the amount of down payment — requires an upfront premium and also a monthly premium.
A VA loan is a mortgage loan in the United States guaranteed by the U.S. Department of Veterans Affairs (VA). The loan may be issued by qualified lenders. The VA loan was designed to offer long-term financing to eligible American veterans or their surviving spouses (provided they do not remarry).
Who can qualify for a VA Loan?
Most members of the military, veterans, reservists and National Guard members are eligible to apply for a VA loan. Spouses of military members who died while on active duty or as a result of a service-connected disability may also apply. Active-duty members generally qualify after about 6 months of service.
A USDA home loan from the USDA loan program, also known as the USDA Rural Development Guaranteed Housing Loan Program, is a mortgage loan offered to rural property owners by the United States Department of Agriculture.
Who can qualify for a USDA Loan?
The new minimum Credit Score requirements for USDA Loans as of 2016, can no longer go below 640 for automatic approval. If you go below that score it requires a Manually Underwritten loan. The program’s full name is the USDA Rural Development Guaranteed Housing Loan program. Most people call them “USDA loans” or “USDA RD Loans”.
There are three big misunderstandings about Home Loans. First, there is a myth that to buy a house you must have a 20% down payment. The second, misconception is that you must have a good credit score. And the third misunderstanding is that an FHA Loan is limited.
Let’s take a look at the truth about getting a home loan. To be honest, buying a house is a pretty simple process. Most people don’t realize that the Federal government actually has lot of supportive programs in place for people to buy a house.
For instance, an FHA Loan is one of the easiest programs you can use to buy a house. It also requires the lowest down payment amount which is around 3.5%. As I said before, an FHA loan is a mortgage issued by the federal government insured lenders, which protects the lender from loss if the borrower defaults on the loan. This is a great option for the low to moderate income borrower. For example, if you were to purchase a $200,000 house then an FHA loan would only require you to make a $7,000 down payment.
As I mentioned above, a conventional loan is a mortgage that is not insured by the federal government. The lowest downpayment rate is around 5%, however It does require a higher credit score than an FHA loan would. With this type of loan, if you were to purchase a $200,000 house, You would be required to make a$10,000 down payment.
If you are a veteran, you may want to look into a VA or Veterans Affairs loan. This requires a 0% downpayment when purchasing a house. In this case, the lenders are insured by Veterans Affairs.
It is hard to believe but there are actually no Home Loans that require a 20% down payment. If you are able to afford the minimum downpayment, the additional money toward the down payment is optional to purchase a house.
Based on my years of experience, most of the home loan banks are not asking for higher down payments, but they do want you to have a stable amount of money in your bank account.
Remember, real estate is a long term investment, it’s stable, but it does have one of slowest returns.
So, there are really two options when purchasing a house, you can save up 20% of your your money to make a downpayment, and that may take several years, but it will certainly help you avoid a large bank interest. Or you can purchase your house with as little a $7000, minimizing the bank interest and own your home for rest of your life. One more thing, when you own your house, you can expect it to increase in value over time.
Contact Amazing Kim today and find out how he can help you get into the home of your dreams by filling out the contact form or calling (713)725-1703 now.